The economy is slowing down, according to recently-released economic data. On Friday, the federal government announced that job growth decelerated between February and March while large corporations announced a number of significant layoffs.
The news came below experts’ estimates and is a sign that the national economy may be close to entering a recession.
The total number of jobs created in March was 236,000, below several estimates. The total labor participation rate also declined. The increase in payrolls was the lowest since the end of 2020 and wage growth also rose at the lowest rate in nearly two years.
Furthermore, a number of large companies announced layoffs, including Zoom and Walt Disney. Amazon recently announced a layoff of 9,000 employees.
The economy added 236,000 jobs in March, a slight slowdown from the strong gains of recent months that indicates the labor market might be slowing in response to the @federalreserve's rate hikes but remains robust.https://t.co/RXbkMQ5W7S
— Washington Examiner (@dcexaminer) April 7, 2023
The news also came following a difficult balancing act for the Federal Reserve. If it raises interest rates too little, inflation will likely continue or increase. If it raises it too much, the national economy could spiral into a recession.
This effort at balance was recently seen as several prominent banks, starting with Silicon Valley Bank (SVB) became insolvent. The Federal Reserve and the FDIC stepped in, but there was and still is considerable fear of such collapses continuing to spread.
In the meantime, the efforts to shore up the banks also exposed a core weakness of the Fed’s strategy. If it continues to raise rates, there is an increased chance that a number of banks would start taking large losses. SVB, for example, had invested in a number of bonds that paid rates under the going interest rate.
The result was the largest banking collapse since the 2008 banking crisis and a recent lawsuit targeting the bank’s auditor and underwriters.
The results of the job report are yet to be seen. However, the recent pressure from bank failures led to the Fed raising rates less than expected. Furthermore, the Wall Street Journal reported that the recent increases in interest rates likely led to a reduction in hiring nationwide.